What Are Blockchain Smart Contracts?

The blockchain smart contract refers to a contract that has been converted into computer code and then stored on a blockchain, where it can then be backed up and authenticated by thousands of other computers.

There is one more aspect of a smart contract that makes it so unique – it automatically executes without the need for middlemen or intermediaries.

There are several reasons why smart contract development has become popular:

A smart contract is completely authenticated and cannot be changed without the approval of all parties to the transaction.

A smart contract can be easily tracked, monitored and enforced.

A smart contract avoids the extra costs and delays of using intermediaries.

Blockchain smart contracts can be used for property contracts, in which one party agrees to buy, lease, or rent another property in exchange for fulfilling regular financial obligations (like paying the monthly rent). They can be used to exchange any financial assets of value or by large corporations to ensure the smooth functioning of their supply chain. This avoids the potential for bottlenecks and other disruptions.

The reason why blockchain smart contracts are so revolutionary is because they completely eliminate the need for intermediaries, lawyers, or escrow services. Think about that for a minute. What if you wanted to sell your home to someone else? In today’s world, you need of lawyers, real estate agents, escrow services, and banks. In the blockchain world, you don’t need any of these intermediaries. Two people, even if they don’t know each other or are based in completely different parts of the world, could execute a smart contract for a specific piece of real estate. Think of smart contracts as a vending machine for goods – such as a candy bar or bag of chips. You simply insert your money, choose the item that you want, and within seconds your item is waiting for you to enjoy. Granted, things are a bit more complex when it comes to blockchain smart contracts because instead of fiat money (i.e. coins or dollar bills), you would be inserting cryptocurrencies into this hypothetical vending machine. Most smart contracts are written for the Ethereum blockchain, so you will most likely pay with via the Ether cryptocurrency.

While the idea of a smart contract development might sound complex, it really only consists of three pieces of information, all of which can be easily coded by skilled blockchain developers: from whom the contract is being sent, to whom the contract is being sent, and what amount or asset is being transferred. Typically all of that information is recorded on paper. Blockchain allows all of that information to be recorded as a piece of computer code that can then execute a special type of program.

It’s easy to see how smart contract development has the potential to change how way we think about financial transactions or legal agreements. Blockchain developers can typically transform most paper contracts into smart contracts – allowing two parties to carry out a trustworthy, accurate, and completely authenticated transactions. All of this without the need for legal fees, financial fees, and other extra costs.

Hassan Sarwar is Founder and CEO at InfiniOne, which he launched in 2012 out of his dorm at the University of Southern California. He is on a mission to make building technology easier for businesses in today’s connected world.